tv Charlie Rose WHUT April 23, 2012 6:00am-7:00am EDT
>> rose: welcome to our program, tonight we go to washington where there is a conference put on by the international monetary fund imf. we talk to christine lagarde, the director of the imf and several international financiers about the global economy and what we might expect in the years ahead. >> what makes me optimistic today is the fact that the imf membership, you know, rose to the challenge, decided to put over 430 billion dollars with the imf to deal with issues in the future. and you know, when i ask myself why are you optimistic, i always think of the dialogue between the who's -- -- and voltaire. he once said to voltaire, they didn't like each other. he said life is tough and voltaire looked at him and said compared with what. >> rose: wul a global frns from the imf conference in washington next. >> funding for charlie rose was provided by the following:
>> tonight a special edition of charlie rose >> rose: . >> rose: we're in washington where the international monetary fund and world bank are hold, their annual spring meetings. finance ministers and central bank officials from the imf and g-20 are discussing the path ahead forth global economy it is a pivotal moment for europe and the world. in december efforts by the your pone central bank provided calm to financial markets. but after months of progress there have been setbacks, elevated barring cause for spain and other struggling nations have caused alarm. european union and the imf have composed separate rescue funds to ensure economic stability. today the imf announced that it secured more than 430 billion dollars. mi joined this afternoon by distinguished group christine la guard-- lagarde is a managing director of the imf. augustin carstens, anders
borg is sweden's minister of finance and christina romer on president obama's panel of economic advisors now teaching in california. i'm pleased to have all of them here and i begin with this question. how hard was it to do and how significant was it to put together this $430 billion fund? >> charlie t was hard going to begin with because when you see that mountain to climb, you're not too sure their's going to get to the top. but i must say that in the last few days, there have been willingness of the international community, many countries, you know, from japan, south of the process to switzerland, to russia to china toindia, to singapore, to mexico, to sweden, and all the nordic countries with it, 20 of them just rallied and decided to express their support not only to the
institution, but also to the virtue and values of multilateralism, you know, to be there for others when there is trouble. and it was extremely gratifying at the end of the day to, you know, not only hit the target but exceed the target. >> rose: why is it necessary? >> well, it is necessary because we are here to anticipate. you know, if you talk to us, the economists of the imf, we always anticipate risk. we always have those dark scenario because we have to be ready, just in case things turn sour. and at the moment, while there is a little bit of recovery on the horizon, we know that there are also some very dark clouds that have not yet dissipated. and where we need to be available, for anybody who is in trouble. >> rose: the united states did not participate. >> the united states is participating in a different way. secretary geithner indicated that with the lines that the two central bank, the
european central banks and the fed on the other hand have between themselves, the u.s. is actually engaged in helping out the europeans. >> rose: europe provided more than half the funds? >> the whole of europe, yes, you're right. the eurozone came for 200 billion dollars, and countries l the nordic countries, sweden, very well represented here, denmark, norway, the czech republic, poland, the u.k., they, i'm sure i'm forgetting some of them. >> rose: japan was important. >> japan was key because you know it's always the same. it's like a dinner. you say to somebody, why don't you come because so-and-so is coming. you're not to sure if they are coming but you turn to so-and-so and you say you knows what, charlie is coming for dinner and they will come. japan was exactly that japan did it first. >> rose: all right. let's go, pull back and look at where we are. the forecast that has come out of this meeting, tell me what it is, and you have said i think that light
recovery, spring winds and dark clouds ahead. >> yeah. you know, it's all based on work that is done within its imf. we have a terrific research department o livia with us here and area departments that have really, you know, their fingers on the pulse of countries. and we try to do as good a job as we can to forecast what's coming. we see better numbers coming out of the united states, you know. better employment, more importantly, reduced unemployment. better manufacturing numbers, so there is some good movement. >> slight recovery. >> and the europeans have done quite a lot. sickly since the beginning of the year, you know with this big refinancing scheme launched by the your pone central bank. the firewall that they finally decided to reinforce significantly. so all of that, attenuated the financial tensions that there was on the, on their markets but it's fragile.
you know, we see spain being again under stress. and yet doing lots of good things. so it's, those are the dark clouds. slow, protect-- protracted growth, high unemployment, potential oil prices that increase. i told you, economics do dark things. >> but the two big things that have been cite bid you and others are oil prices and europe, what happens there. those are the two huge questions on the horizon. >> i would add another one. assume at the end of the year the united states faces this very difficult situation where the tax cuts are finished. the spendings are cut off automatically. all of that with the background of the debt ceiling discussion that could also be a very disturbing moment. so it's tough on all corners. >> rose: that's what we in the united states call fiscal cliffs. christine let me bring you in, if i may. look at the united states in terms of what has come out of this summit, this
washington moment. and projections for the united states and how you see it. and how you see the american economy today. >> so certainly the american economy, you know, is stable. it is growing modestly, moderately. we've seen again kind of steady healing of the labor market, gdp growth is in kind of a two and a half to 3% range. so that is much better than we had a few years ago it is much better than what is going on in europe where they have seen gdp growth fall and unemployment rise again it is importantly not great, right testimony is not the kind of growth that you need to actually bring the unemployment rate down quickly. so i think we are still in a fragile position. more importantly, if europe gets much worse, that is a very big risk for the united states. and i think as madame lagarde mentioned, that fiscal cliff in the united states hitting us at the end of this year is a very big
problem that is going to have to be navigated through. and would be devastating to the u.s. economy if we really went over that cliff. >> rose: let me talk about emerging markets. much conversation about the emerging markets. they are participating in this 400 plus billion dollar fund. where are emerging markets from china to india, to brazil, the brick countries and more in terms of their own economic global growth. >> well, the story, is that emerging and developing economies have contributed more than 50% of the global growth of the last five, ten years. and they contribute to global trade. so enormous contributions from emerging and developing economies to world growth and oil trade today. but you must recognize that as a collective, there is
still accounts for less than 50% of all gdp. less than a third of oil trade, so as much as you recognize that the engine of oil growth today, you must also recognize that in stark term these have a lot of catch up to do. >> should we view emerging nations today, emerging economies are no different than developed economies? >> in what sense. >> well, in the sense that they have high-growth rate. >> yes. >> in a sense that they are providing more of the total economic growth of the world. >> yes. >> economy. >> yes, but they are still very poor countries. india is a large economy. but our per-capita income is $1600 is, you know, is nothing compared to the rich world so when you say that you are going very fast, you must also recognize where we are coming from. there is an enormous amount of poverty t there is an
enormous amount of inequality so there are big challenges in emerging economies. i can speak for india, where i come from. you know, india has more poor people than the entire continent of africa. and there is so much of aspiration in the last ten years. so the challenge of growth, the challenge of inclusion is enormous. and the government will have to meets to aspirations. >> rose: what was accomplished by the ecb 1.3 trillion commitment? what did it accomplish and is it as many say simply a holding action. >> well, i think the ecb did the right thing. as a conservative central bank they safeguard financial stability in a crucial moment. so that was a very, very important game change for the european scene. i would hope that the ecb feels that they have support for the target from the finance ministers and that they still feel that they have an ability to act.
>> rose: how should we look at bond yields today in europe. >> well, they have had an interesting journey. i mean we saw a very strong spread tightens over the last three months and over the last four or five weeks they wide everyoned again. hopefully the ministers coming out of this meeting and also continuing we get strong from the european governments, should put the bond spreads on track again. >> rose: one question that always arises in the united states is an issue, an issue in every economy is where is a-- and you spoke to this this week. this issue between austerity and growth. >> i think, sorry, i think that at the end of the day, both issues can go together. i think that countries because at some point in time they overspend. now when they overspend sometimes countries face limitations in terms of
financing. and when that happens, deals go up very fast. and as a matter of fact, some countries that have been in trouble basically don't have access to markets. at that point it's important to implement austerity measures. now the measures should be undertaken and usually this is done with the support of the imf. basically the objective is to turn a-- psyche kneel a virtual cycle. once the countries do or commit to a strong enough adjustment, often times to austerity, people, markets believe that it is sustainable. once the expectations have adjusted, yields tend to fall very fast and that allows markets to go back-- sorry, countries to go back to the market and
then they are entering a virtual cycle. this is a story we have seen before in many countries. say in my country, mexico, for example. we were in trouble in the '70s, '80s and '90s. and usually that's the path adjustment takes place so here the combination is the implementation of credible policies. and once credible policies are in place, they can-- those countries can go back to the markets and then the process of recovery starts. and something that we can see as a result of many of these adjustment processes, is that the virtual cycle can be very quick. as a matter of fact, here in the fund you can see in different examples, that countries can, are able to pay back the funds. much quicker than the regular schedule of payments anticipate precisely because
virtual cycles kick in and that implies a very rapid recovery. but the key here is to get to the point where markets believe that the effort is enough. if you, if you don't do enough, then you will not enter into that virtual cycle and that can also be very painful for the country. because then expectations keep deteriorating and the political support for the measures is reduced. so it's tricky. it requires a very strong determination by its country. enough of what should be done to enter as i say into that virtual cycle. >> my impression is at some point you suggested that we need to pull off, pull back from austerity. >> i wish it was as straightforward and simple as go for austerity, don't
go for austerity, go for growth, don't go for growth. >> rose: it's a balance. >> mexico was a great exall-- example of how things work out. and we've had lots of debates. augustin and i on this matter. we are in quite a normal circumstance. that is what is making, what is making the equation a bit more complicated. first of all because some of the countries you have in mind, and you know. >> the eurozone countries, operate within a currency zone. point number one so there is one lever that is no longer available, the devaluation. second, you apply recipes to countries where the per-capita income is about 200 times that of india. now i'm not suggesting that it cannot work because it's an advanced economy. but it is still, you know, in an economic field, that is slightly different from the programs, the typical programs that the-- had in
mind so it makes the effort more complicated. and you know, we are exploring in many ways, i'm trying to accommodate enough of fiscal consolidation with sufficient growth friendly environment and measures so that it can move ahead. >> when you spoke to it my assumption was the following. she's worried that there is too much austerity and not enough growth. >> yeah. >> rose: that the balance was to the right. >> if you take the zone as a whole. >> rose: right. >> yeah, yeah, we could certainly do with more growth. and i think that you should ask, on this, because he's actually trying to work on that because growth has gone down in sweden as compared to what they had. and they're taking some really, really serious measures to target the right spending and the right people. >> all right. >> the european debt destabling next year and starting to go down according to the fund and the deficit is around 3% in,
for the overall area, so i would agree that the fiscal side is a priority. you must stick to the plans and you must deliver. but on overall, the structural reforms, particularly deregulation of the labor market and deregulation of the product markets is the key here because there is a productivity deficit between the southern european countries and the northern european countries. and that means that you need to lower the regulatory burden. you need to take away barriers of entry for entrepreneurs. you need to take that they have done very bravely now in italy to deregulate domestic secretary wrer the cost pressure has been too high. and i think to implement rapid structural reforms in europe is probably the key component to combine with bank action and also stick to the plans for the fiscal side to get growth back. so what cars tense is saying is very-- carstens is saying is very rel vent. the only way when are you out of money and growth you
need to dot structural things because those are not the costley measures. >> rose: when we discuss it in america we talk about the difference between spending and taxes. >> well, let me jump in here. because i think i disagree quite a bit with some of my colleagues up here. i think there is absolutely a trade-off between growth and austerity. i think what we are seeing in europe is the downside of that cost. that they have moved very strongly to austerity. i think too quickly. and that is why you are seeing unemployment rates just a little bit of a reality check. the unemployment rate in spain is almost 25%. and gdp growth is falling again, right. that is not a success story. and when i hear people talk about structural changes, absolutely we need to do that. every country could be more productive, less regulated, you know there are lots of ways to make economies work better. but fundamentally the problem in many of these european countries is a lack of demand, a structural change is not going to some
of that in a problem. and that's y you know, you're going to need to have things like the european central bank. they have done some amazing and helpful things in the last few months. they need to do a lot more. and that until you get growth going, there is no way this problem going to end as well. >> i'm so happy, one second. >> rose: . >> point out that the countries that-- . >> rose: when somebody shakes their head when somebody else is speaking it is a sure sign it is 9 right place. >> the countries that went for this stimulus message were spain t was the u.k. t was the countries that are now deepest into trouble. the countries that kept their house in order like sweden, like germany, the netherlands are the ones that are growing, where the employment is to you back above what it were before the crisis and where unemployment has been sliding downward. so in europe we are not a reserve currency in the same way that the u.s. is. so credibility is in the essence for getting spain and italy back on track. and credibility must be based on a very conservative
fiscal policy. there is absolutely no room for backtracking on the fiscal side. and therefore the structural issues is the key. i mean europe has not been growing for two decades. it is not a problem that has arrived the last 20 months or the last two years. so it is a problem that has to be dealt with by fundamentally increasing our competitiveness. >> all right. >> just, right, but countries like sweden and like germany have taken the structural reforms ahead of time. and we're beginning to also cash in on those structural reforms. >> and we've done stimulus but we have not run into huge deficit which is the big difference, yeah. >> yes, you mentioned, charlie, how close advanced economies have come tow merging markets. well, my point is that advanced economies have fallen into circumstance that were prevailing n some emerging markets some decades ago. the difference is we're now at the point where advanced
economies mr. some years ago. now my point with respect to austerity is a problem. the key problem in europe is a visual cycle between weak banking system, weak sovereign debt, weak public finances. and both are feeding into each other and that's a deflating the economy. that's affecting the economy. you will 23409 solve this problem with spending more. and that's why at some point the economy, the countries need to implement the breaks. now the real question is are you going back into a growth or you want to go back into sustainable growth. if europe sort of starts kicking the can forward and they reduce their fiscal adjustment today, it's very likely that they will not
start into sustainable growth. there is a weak sign of weakness in europe that has not been remedied. and that's the two most important markets in an economy is not working appropriately. and that's the interbank market and the sovereign debt market. those two markets are still, i would say, under artificial respiration. and it would be very difficult to establish sustainable growth if you don't fix that as soon as possible. so my own point of view is you would rather front load the adjustment, even if it costs in the short run because then would you establish the conditions for sustainable growth in the future. >> one of the things that aren't working, that make this an unusual time, unemployment has been very high for a long time. we have been in a terrible recession since 2008 in the
united states and in europe. and also interest rates. the policy interest rates, the tool that the countries have to offset use ter knit a normal time is not there. we're at the 0, and that makes austerity at this point particularly costly. you don't have anyway to counteract the effects. and if you keep unemployment high for another two or three years it's not just biting the bullet and getting through t you may well make unemployment permanently higher. that there are these costs. and we've learned that there are these cost. so i hate budget deficits as much as anyone. it is a question of what is the right way. and i think the international monetary fund has been an important voice of reason in saying countries differ. obviously a country in the middle of a crisis is going to have to take extreme measures. but a country say like germannee that is in a good fiscal position, that has seen its growth slow down, they could, in fact, be taking some more aggressive, some expansion measures that
would help them it would help their neighbors, right. it's not a good time for every country that may at some point need to consolidate or just feels like it would be a good thing to do. for heaven's sakes, that's not a reasonable thing to do when other countries may have no choice. >> they don't think, they don't need to help themselves because there at full capacity at home. what they need to do is to help others at home there. and sort of pump in investment and projects in other countries. because in germany it's not going to do much good. it will only risk to raisin flation which is the whole thing something that germany doesn't want. >> go ahead. >> the obvious point here is that germany did structure reforms and all through the crisis unemployment has gone down. germany is now substantially below its unemployment level in 2008. so they did not do this stimulus as they did in the u.s. in the u.s. unemployment
exploded upwards. in germany they did structural reforms and unemployment went down to. my mind that looks like a pretty strong argument for the german position and let me point out f we want to have a room to maneuver forth ecb then we must stick to the strict fiscal policy. that is creating cred ability enough to give room to the ecb and that is more important. because a key issue here is the banking sector. we need to get the european banking sector working again. and speaking to a tough fiscal stands would open up more room to maneuver when it comes to dealing with the banking side. >> i would, tell me if i'm correct. germany today, the percentage of debt as a percentage of gdp is still in the '80s and before the crisis was down around the '60s. >> yeah. >> so they've got a considerable way to go tote get back to where they were. >> when i was a young man and sweden was into trouble. we thought that 80% was completely unsustainable. everybody believes now you can have an 80 and 09 and a 100 percent. i do believe that that is
very high. >> but the united states would be happy over the next ten years with 75, wouldn't they? >> the united states, will you not get any arguments. we have a terrible long run fiscal situation. and the whole question is how o to deal with it. so you know, i would be the first person to say let's pass the bowles simpson bipartisan fiscal commission reports. it's a very strong, long term fiscal consolidation. use that as for giving you some space to take more infrastructure spending, more education spending to get us going. >> so why do you think we haven't done that in this country? >> very a terrible political gridlock. the president tried valiantly last sum tore propose a grand bargain as a way of getting our long-range -- >> speaker boehner says i've put revenue on the table and we had an agreement. the president then wanted to go back and ask for more revenue. >> i would believe the president on this one. >> rose: for understandable reasons. >> no, because he's right.
>> rose: let me-- weigh in on this i mean you look at a very fast-growing economy. >> you mean austerity. >> rose: yeah, the question of growth versus austerity. and the goal of creating stability over the long run. >> yeah this growth versus austerity, translates differently in different countries. for example in india, i think the government is not-- versus austerity but austerity for growth. it's like the government has to cut its fiscal deficit in order for growth to-- growth to decrease. having the fiscal deficit actually india was on the path of fiscal consolidation before the crisis. then we have this crisis of fiscal stimulus. and even as we recovered sooner than most other countries, the fiscal deficit still continues.
and that's been adding to inflation. that's been, i would think even as it is adding to growth in the short term, i think it is long-term growth-- so we believe at least in the central bank which come from, that the government must get on the paths of fiscal consolidation, make it stronger commitment to fiscal consolidation. so that the private sector is not crowded out of the credit markets. and that the economy will become more he fish ents. this number of things that you know, to say against fiscal deficits. and all, most of them are playing out in india. so we need the government to cut fiscal deficit for growth to be stronger, for inflation to be down, and for debt sustainability. debt stability to be more credible. >> how do you see the liquidity of banking institutions in europe today.
>> well, they have taken advantage of the two successive long-term refinancing programs puts together by the ecb. so what we understand and we don't go under the skin of each and every bank's balance sheets. or we do that on a regular basis, not all the time so i can't fell you today. >> but it is an issue you have to worry about because of a connection to sovereign issues. >> i think they have plenty of liquidity at the moment. the central bank, the european central bank really went out of its normal way to make sure that there would be no liquidity crisis. so there is plenty of that. now i think what the bank did, they probably took some of that liquidity for their own refinancing. and some of them took some of the liquidity to buy some sovereign bonds. because what we see certainly from our research is that there is a great sort of identity between a central bank and the nationality of its bond portfolio. they typically, you know, the italian bank will buy
italian bonds. the spanish bank will buy spanish bonds. so i'm sure that they have used some of that. it was relatively cheap money n a way, with which they could acquire bonds that were of a much higher yield. >> the overall global, i mentioned the growth of the global economy it seems to me that what came out of here was a different picture today than what we might have expected several months ago. >> yeah. >> what happened to cause you to have some, what numbers, what scared you to cause us to say wait a minute this may not be as good as we thought. what did you see? >> first of all we saw improvement which is why we slightly improved and upgraded our numbers. >> but did it get too excited about that improvement and therefore -- >> no, i tend not to be excited about numbers rses all right. >> except the trillion dollars. >> rose: 430 billion. >> but together with what we have already and what we
have available, you know, we are a $1 trillion. no, we saw a slight improvement in the last three months or so which is why we improved our forecast as christine was saying. it's in part due to the improvement of the u.s. economy. but we have been seeing a gradual buildup of comprehensive tool kit in europe. and yet not enough understanding, appreciation, public communication maybe. >> political will. >> political women i think is there. but it's the way in which it translates into measures set of decisions, predic predict-- predictability of policy path, measures taken for the banking sector, so with all that as a background, we just thought that it would be better for us to have a stronger reserve available for all the members. because it's not just about the eurozone, you know.
in the eastern europe, way outside n africa, for instance or in asia there are countries that want to have the support of the imf as a precaution. just to say we are doing all the right things. mexico did that about what, was it three years ago. mexico had a very good bill of health and decide tlad it would go for the flexible credit line which is a particular facility that is available, not drawn on, but that indicates that this country is doing all the right things from a policy point of view. >> yes, absolutely. i mean what we tried to do is to differentiate the-- from the rest of the crowd. we had a very clean health bill. and we wanted to feel of quality in our policies right up front. and the way it was so put their money where their mouth is and therefore they extended these very handsome credit line. but if i may jump into the point that you were just
making, i think that what hasn't fundamentallically changed from let's say half of last year to today, is that still there is no sense of consolidation in europe and where the responsibility. the fact that now in the minds of the market there is the possibility of having a setback in countries like spain or italy is very significant it i the third and fourth largest -- in europe. and i think that what makes things unpredictable in europe is that not only the issue of the country itself, is how can it affect the rest of the european union. so my own point is that that issue has to be tackled. it is not only the individual country issue for, the interaction of the whole union.
and that interaction is where market was like to see more definite, more definite answers. i recognize that europe has done a tremendous job. that they have done a very determined effort in the last month, but the final petition is still needed and that's why, you know, the institutions like the fund through this collaborative effort from countries outside the region, is giving additional instruments to europe to do, for them to be able to take the-- i think what the fund will do if this resources are used in europe s precisely to facilitate europe to take the difficulty decisions. and given that that would benefit all the world, that is why you see countries from pretty of all continents to be able to be willing to pledge resources to facilitate europe to take those decisions and put
these uncertainties to rest. that basically is affecting all the world. >> is that what you see as the moment and the roll of the imf had jns yes, this is the mission and that is the job, absolutely. to come and support countries that are facing difficulties. even in those normal circumstances that christine was describing. with little by way of-- and where we can impose conditions or negotiate conditions, rather that will bring that country in better shape, back on its feet, however you call it. but in a currency zone. that means lots of more sophisticated things. and you know, one day hopefully we'll see something like eurobonds, euro bill or degree of solidarity amongst members of the zone because much progress will have been done. >> martin wolf wrote a column in the ft arguing that he, or suggesting and
citing the general who talked about the political division in america before the civil war. looking at the eurozone. martin wolfe said i think this morning that informed americans believe that the eurozone will explode, will disappear unless there is centrifugal force what are the forces that yeep the eurozone together. >> if you remember he also finishes by saying it will be a marriage t might be a bit difficult but it will be a marriage. >> he did say that yes. >> tand will stick. >> but tell me, i'm deciding whether centrifugal sources he cited or others why you believe that it will not split or divide. >> i'm a little biased on that because i have some european blood in me and some european faith as well. because i think that at the heart of the project which
might be imperfect which needs to be improved and reengineered in many way whence it comes to the currency zone there is at the heart of it a very strong political germation, a desire to be together and a desire to overcome the hardship age the horrible scars of what we lived and have gone through a century ago. and i think that is sort of stronger and better than the tk came-- technicallities of it. so i think that the technicallities of it. hopefully the european members of the eurozone will work them through and the imf will help. but i think that the strong field, the political will that is at the heart of the construction is solid enough. isn't for the next generation, my children who are, you know, in their mid 20ous, they believe strongly that there are europeans, and they don't understand why we make such distinctions so, it has gone
beyond. >> you think more european than french? >> both. >> should i let her off that easy? >> weigh in on that, europe today, and what what are the consequences for the eurozone? >> well, i strongly believe in the european project. for a small country like sweden the only place in the world that we can be heard is on a european, in a european corporation. and that's true for all of the europe mean countries, europe, some of them have not recognized it yet but in a world economy we're all small. and therefore the european union s the last six years that i have spent on the economic council of europe made it very clear that european corporation is the most efficient way that we have to deal with our problems. let us remember that asia was very bad in '97, '98 with its crisis and came out with, and everybody was then saying that the imf was doing the wrong thing and
killing growth. but then asia grow for 5, 6% per year of the years to come. and if europe are now doing the right thing when it comes to improving its growth prospects and there are very courageous decisions taken in italy, spain and greece, it is very clear when the ocd assessed structural reforms that it is the european countries that are now coming forward with deep structural reforms. so i would guess that the growth prospect for europe for the next ten years are better than the last ten years. the fiscal side is already going in the right direction. if this is like it was for mexico or sweden in the 90 its or to asia in the 09ses, a moment when the countries really start to reform this could be a turning point for europe. >> that leads me to this question. i will start and go down the line. what ro the building blocks to sustain abilities of a growing global economy. >> well, first you need to have the basic macroeconomic
building blocks in place. and basically that relatively low fisca fiscal-- sustainable debt, the adequate monetary policy, citing inflation, keeping inflation low, and a strong-- or the financial system so the financial system can contribute to growth. that provides you-- the necessary conditions for growth. now what will accelerate growth is how can you turn your economy into being more productive and more competitive. and that depends on the structure of reforms so that you can do. range of policy measures that you can do, starting by investing in human capital, law and order, competition, in each country and industrial policies and so on. so it's the combination of a
good policies at the macro level and incentives and policies at the. the combination of both will give you sustainable growth. >> he said what. >> he said it's hoped. >> rose: no, no he didn't. we have more. >> i can't are ask that. >> rose: he stayed well but there's more. >> he stayed very well, and he said it all. but i perhaps could add to that, you know, you need price stability, financial stability, but you also need inclusive-- this occupy wall street, occupy that we saw very high profile. but every day across towns, across villages, across cities in emerging economies, those inequality debates are paying off. it's inequity it is true that poverty has come down. people are, even in emerging economies people are better
off today than they were ten years ago than five years ago. but they still find that they do not have access to opportunities. they do not have access to exploitsing the economic-- that is taking place. so on top of growth, on top of price stability, on top of financial stability, we need equity. inclusion. and from an emerging economy perspective i would think that one of the big things that we have to learn in order to achieve some of this, apart from a domestic macroeconomic situation, domestic policies, domestic governance issues is to learn to manage globalization. and as we are integrating into the world, the many challenges they offer enormous opportunities but it also pose incredible challenges. so as emerging economies we have to learn to do that. in fact 29008 crisis and the
ongoing eurozone crisis, one of the biggest lessons that we've learned is that we are not the-- what happens in advanced economies through a variety of challenges. and we need to be able to, we are cutsing costs, of course, by integrating with the world but we are also getting benefits and we need to manage globalization the way that benefits are far in excess of the costs. >> continue about the building blocks to a stable economic growth, which is the demand for the future. >> i would say jobs. i do everything that both of them have said, jobs. because you can have growth. but it's not going to be sustainable if it does not include, if it does not create jobs. we have had periods in recent history where we had growth but without jobs. doesn't have jobs it is not going to work. but if i may just add as a
subset, i think what is really needed as well is a well functioning financial system that operates in the public interest. that is, i think it's a sector of the economy that is very special that has specific attributes and privilege and therefore has also a duty to society. so more of public interest in that financial sector for it to actually work properly i think is critical and as a former lawyer background i would say an independent, efficient judicial system because the issues of corruptions and the like have to be addressed at that level properly. >> do you think tlz is some momentum for that. >> yes, yes. >> for change within its financial sector, in terms primarily about regulations or is it -- >> it's b you know, we make, you know, big-- of the regulation and too much of it. there have been for the last three years a huge focus on the financial sector.
there are initiatives all over the map. i think what is at steak now is proper accord nation: -- coordination, the appropriate and interpretation amongst all the players so that there is no little loopholes or little arbitrage that can be had, and i would say as a general principles, that the financial institutions work in the public interest, not to say that there would be philanthropic institutions but that they be focused on what they have to do which is to finance the economy and not so excessively focused on other matters. >> go ahead. >> well, i would add strongly underlined-- it is not only that we are out of growth and money. we're also out of trust. if there is no social equation, the top is take off and leaving the rest behind there will be not a-- putting this together and therefore the governments will not have their credibility and support from the public to
do long-term sustainable reforms. so social cohesion, dealing with income differences, dealing with the social mobility issues, education, obviously but also younger social policies extremely important. because you cannot see sustained ongoing economic reforms without social cohesion. >> i think that there is so much that has been said. i can agree with virtually all of it. it's all about the long run. it's all about as you phrased it sustainable growth. and that's terrific and that's great. and i'm worried we ever get there, right. that we are still in the middle of such a problem. and i think as i mentioned, europe is still so far from being out of the woods, that until we get growth going soon and strong in a lot of advanced countries, i think all of this discussion may be all pie in the sky because we're headed into very dark waters. >> i would like to ask one
very brief point to the conditions for sustainable growth worldwide. and as a matter of effect, reflecting a fear i have for something i have seen, an actually in my country, and that is the fear of the temptation for protection. i think many countries that have been 235ek9d by this crisis are falling into a temptation to protect their own industry. and if, it's own market. every country do exactly the same, the only thing that we would will achieve is just to shrink the whole cake. and we will suffer. so i any that these very important that we renew our commitment to free trade and not only in goods and services but also that we keep adequate situations for international investment. i think that is very important. and the actual situation can be a threat. >> how significant do you
see what's happening in china to the overall global economic forecast. >> well, we try to stay away from the rhetoric, because you will hear, china, for instance, say that it is undergoing major major changes. and will you hear the united states saying hmmmm, not bad. but really not, there is say long, long way to go. we try to-- what has been achieved. both in terms of appreciation of their currency and kite a bit has taken place, particularly lately in the last couple of years, seven percent is the appreciation of the -- >> different from a double digit. >> that's right. and i'm talking about the appreciation of currency. >> right, right. >> but then you look also at the current account balance. and you really analyze and the research department of the imf has conducted that exercise, what it's attributable to. and yes, part of it is because less demand is
addressed to china. you order less goods from china because you're to the doing so well at home. but they're also other reasons. because there is a shift towards more investment in china that are loaded with imports from elsewhere. so china orders machinery equipment in germany to equip factories in china. >> right. >> and they're also, you know, terms of trade so there are lots of reasons why the current account of china has moved from being over 10% to being less than 3%. we in our research we foresee that it will go up again if the situation improves. but not as much as 10e%. we predict it will be in the range of 4, 5% which is a big nominal amount because china exports mass difficulte-- massively. but in relative terms it is already a major change so things are heading in the right direction. and it's typical of the chinese policy to take one
step at a time. >> i want to know as i close from each of you, why are you optimistic. >> you're starting at the wrong place. i think, i think probably the main reason to be optimistic, certainly when i think about the united states, we are making steady progress. and that is certainly something to celebrate and i think it is because of many of the policies that have been taken. i think that that is incredibly important. i think the thing that gives me some hope, say b europe and i've expressed a lot of concern, is that if they don't deal with their problems f will be so catastrophic. that i think in my heart, i believe policy makers do, will do what they need to do. and i think that is, you know, as dysfunctional as the marriage might seem at times it's a lot better than a divorce.
and i think that's the thing that holds all of us together and it's what gets people at the table and bringing more money to the imf and firewalls and doing what ultimately needs to be done. >> well, africa, asia, america, rvr ca has been growing 6, 7% the last ten years it is very likely you could have the best return on your money in africa for the next ten years. asia is still growing very strongly and we see some hope for the america so the aaa i think is the optimistic sign. >> okay. >> rose: i will skip over you and come back later. optimism. >> i can speak from an indian perspective, what inspire piece about india, what inspires me about the emerging world 9 aspirations of people, across the country, you see hundreds of millions of children who see what's happening around the world. they want better things for themselves. they want to improve. they want to live better than their parents. they've got aspiration force
higher quality of life so i think that alone is going to drive the government, drive international institutions to improve the quality of life across the world. >> i would make one comment from an emerging market, the emerging market, this crisis tell us very yearly they merging markets that to do your work from the point of view of good economic policymaking. i think that the fact that the emerging markets have been able to sail through this crisis relatively well is because we have been doing our job. and these reinforces what we have been doing. so these is well for our future. so mexican point of view, we are very close to the u.s., so if the u.s. does better, mexico will do better and for me that is a sign of optimism. >> rose: we leave its last word to you madame director.
>> well, what make piece optimistic today is the fact that the imf membership, you know, rose to the challenge, decided to put over $430 billion with the imf to deal with issues in the future. and you know, when i ask myself why are you optimistic, i always think of the dialogue between russeau and voltairing and russeau once said to voltaire, they didn't like each other, he said life is tough. and voltaire looked at him and said, compared with what. (laughter) >> rose: all things considered, which would rather be alive. thank you, thank you all very much, thank you, and thank you for joining us here. this is the summit meeting of the imf in washington. it has sometimes been called a washington moment, but it is a moment in terms of the way all the countries of the world look at their own future and consider economics and consider fairness and consider their own people. these are tough times but there are as they have